Financial Market

Definition: Financial Market refers to a marketplace,

where creation and trading of financial assets, such
as shares, debentures, bonds, derivatives, currencies,
etc. take place. It plays a crucial role in allocating
limited resources, in the country’s economy. It acts as
an intermediary between the savers and investors by
mobilising funds between them.
The financial market provides a platform to the buyers
and sellers, to meet, for trading assets at a price
determined by the demand and supply forces.
Functions of Financial Market
The functions of the financial market are explained
with the help of points below:
 It facilitates mobilisation of savings and puts it to
the most productive uses.
 It helps in determining the price of the securities.
The frequent interaction between investors helps
in fixing the price of securities, on the basis of
their demand and supply in the market.
 It provides liquidity to tradable assets, by
facilitating the exchange, as the investors can
readily sell their securities and convert assets
into cash.
 It saves the time, money and efforts of the parties,
as they don’t have to waste resources to find
probable buyers or sellers of securities. Further, it
reduces cost by providing valuable information,
regarding the securities traded in the financial
market.